Deeper Spanish recession in 2012, 2013: IMF

(PressTV) The International Monetary Fund (IMF) has said that the Spanish recession would be worse than initially estimated as the country’s economy will contract 1.7 percent in 2012 and 1.2 percent in 2013.

Spanish protesters shouting slogans, condemning the recent austerity measures announced by the government on July 13, 2012 in Madrid.

The IMF also said on Friday that increasing market tension could upset Spain’s ability to finance itself, despite a eurozone bailout agreed for Spanish banks and other financial reforms for the country.

“Market tensions could intensify further, threatening market access, particularly if policies fail to stem capital outflows or due to further stress elsewhere in the euro area,” the IMF said in a report on the 17-nation eurozone’s fourth-largest economy.

On June 9, eurozone finance ministers agreed to lend 100 billion euros to Spain to save its teetering banks, which means more debt would be added to Madrid’s already huge official borrowings.

Spain’s borrowing costs are close to the level at which Greece, Ireland and Portugal were compelled to seek international bailouts.

On June 29, at an EU summit in Brussels, European leaders agreed on financial reforms for the eurozone, including measures to provide capital to banks without adding to the debt burden of host countries.

“Spain’s prospects for lowering borrowing costs would be critically helped by a timely implementation of the summit decisions and continued progress toward a banking and fiscal union at the European level,” the IMF said.

The Spanish economy is suffering from the aftershocks of a real estate bust that has devastated not just the banks, but families as well.

Battered by the global financial downturn, the Spanish economy collapsed into recession in the second half of 2008, taking with it millions of jobs. Unemployment has approached 25 percent.

The worsening eurozone debt crisis has increased Spain’s financing costs and the country is seeking a European Union bailout similar to the one Greece received.